McCormac Co. wishes to maintain a growth rate of 12 percent a year, a debt-equity ratio of 1.20, and a dividend payout ratio of 30 percent. The ratio of total assets to sales is constant at .75.

Required:

What profit margin must the firm achieve?

1. 21.65%
2. 9.28%
3. 12.18%
4. 5.47%
5. 5.22%

Seaweed Mfg., Inc., is currently operating at only 95 percent of fixed asset capacity. Fixed assets are $440,000. Current sales are $550,000 and projected to grow to $630,000.

Required:

How much in new fixed assets are required to support this growth in sales?

1. $38,700
2. $38,800
3. $64,000
4. $38,900
5. $39,000